4. KapStone Paper & Packaging Corp.

The rest of the world may be confronting the specter of deflation, but in paper processing, prices are rising fast, and that's boosting the fortunes of KapStone Paper & Packaging Corp.

Northbrook-based KapStone's second-quarter sales jumped a surprising 27%, to $199.1 million, buoyed by a rapid-fire series of price increases on key products. Prices for linerboard, used in making corrugated cartons and other packaging, reached $600 a ton in the second quarter, up from $500 a ton last year. Another increase of $60 a ton is set for later this year.

The rising prices haven't dampened demand: KapStone's factories are running at 99% capacity, up from 85% a year ago, says Steven Chercover, analyst at D. A. Davidson & Co. in Great Falls, Mont.

Mr. Chercover recently bumped up his forecast for KapStone's 2011 earnings to $1.58 a share from $1.30 and put a “buy” rating on the stock. “KapStone is finally starting to demonstrate its earnings power, without being handicapped by the Great Recession,” he says.

Roger Stone, 75, chairman and CEO, is KapStone's largest shareholder, with nearly 10% of the company's stock. The second-biggest inside shareholder, with 4%, is his son-in-law, company President Matthew Kaplan, 53.

Mr. Stone, who served on the McDonald's Corp. board for more than two decades, recently recruited Matthew Paull, 59, McDonald's former chief financial officer, to his board.

“Roger Stone and Matthew Paull have made good progress together in building this company,” Mr. Chercover says. “They've been helped by a board that is major league in every respect.”

He adds that KapStone's relatively modest director pay demonstrates “that these folks aren't in it for the money. They're doing the work out of the respect they have for Roger Stone.”